Walmart (NYSE: WMT) saw its shares tumble nearly 9% on August 20 after the retail giant reported a mixed quarterly earnings result that rattled investor confidence.
David Bellinger, an analyst at Mizuho Financial Group, delivered a blunt assessment, calling the quarter a “worst-case scenario” and noting the company had not fallen this far short of expectations in years.
The company posted $6.4 billion in net income for the quarter ending July 31, with adjusted earnings of 81 cents per share, comfortably beating the 74-cent analyst forecast.
Revenue also climbed 5.9% to $187.9 billion, figures that would ordinarily signal a healthy quarter for the world’s largest retailer.
The central problem was Walmart’s U.S. same-store sales growth, a closely watched metric in retail, which came in at just 2.6% excluding fuel — the weakest reading since early 2020, during pandemic lockdowns.
Because Walmart serves such a broad cross-section of American households, investors treat its domestic store sales as a reliable proxy for overall consumer spending health.
Chief Financial Officer John David Rainey told analysts the company is now looking at “arguably a softer consumer environment than in February,” when Walmart originally set its annual forecasts.
Rising gas prices have compounded pressure on shoppers, with the national average currently sitting at $4.10 per gallon according to AAA, up sharply from $2.98 per gallon before the Iran war began.
Rainey said the spending slowdown became more pronounced as the quarter progressed, with June described as “a little more obvious” as consumers grew increasingly selective about their purchases.
Inflation, currently running at 3.4%, has kept the cost of most goods and services elevated, further squeezing household budgets and dampening discretionary spending at stores.
Walmart’s sluggish same-store sales figure was also partially shaped by declining pharmacy revenues, as the Trump administration pursues lower prescription drug prices, particularly for GLP-1 medications.
Prescription drug prices fell 0.8% last month and are down 3.1% year-over-year according to Bureau of Labor Statistics data, and drug prices have not risen in any month so far this year.
On the tariff front, Walmart executives disclosed the company is eligible for roughly $2.9 billion in tariff refunds, with Rainey confirming on the earnings call that “substantially all” of that money has already been received.
Rather than channeling those funds into profit margin expansion, Walmart cut prices on more than 11,000 items during the quarter — a practice the company refers to as rollbacks — to ease the burden on cost-conscious shoppers.
CEO John Furner told analysts the price cuts were applied across food, general merchandise, consumables, and fashion categories, reflecting a deliberate strategy to prioritize affordability over near-term margin gains.
A Walmart spokesperson confirmed the refunds would flow back into customer experience and pricing, with grocery and general merchandise identified as the primary beneficiaries.
Despite the share selloff, Walmart raised its full-year outlook, projecting sales growth of 4% to 5% and adjusted earnings of $2.80 to $2.87 per share, signaling management confidence in the broader business trajectory.
TD Cowen analyst Oliver Chen acknowledged the sales miss could weigh on shares in the near term, but noted that Walmart continues to gain market share from competitors while growing profits faster than revenue.
GlobalData retail analyst Neil Saunders offered a more cautious read, warning that a slowdown at a retailer as central to American households as Walmart raises serious questions about whether consumers are simply tapped out.
Those concerns gained further weight from broader retail data showing U.S. retail sales fell 0.6% to $763.6 billion in July, the first monthly decline in nine months and a result that defied analyst expectations of a modest increase.
